O'Connor 'sought outlet' in gambling

Former San Diego mayor Maureen O'Connor appeared in federal court Thursday to plead not guilty on a money laundering charge. She is accused of embezzling money from non-profit organizations to fuel a gambling habit. She was accompanied by her attorney Eugene Iredale.
— Peggy Peattie

Former San Diego mayor Maureen O'Connor appeared in federal court Thursday to plead not guilty on a money laundering charge. She is accused of embezzling money from non-profit organizations to fuel a gambling habit. She was accompanied by her attorney Eugene Iredale.
— Peggy Peattie

Assistant U.S Attorney Philip Halpern said outside of court that notwithstanding O’Connor’s health problems, the case had to be filed.

“It is the very foundation of our legal system that no individual, no matter how high, no matter what they’ve contributed, is above the law,” Halpern said.

The resolution of the case takes into account her poor health but also requires O’Connor to acknowledge she misappropriated the money and obligates her to pay it back and any tax penalties, he said.

She also has to get psychiatric treatment for gambling addiction. Iredale said that O’Connor’s doctors have said it’s possible her brain tumor pressed on centers of the brain that affect judgment and reasoning, and could explain in part her gambling addiction.

The investigation of O’Connor was triggered when the Internal Revenue Service reviewed tax documents that casinos must file with the agency on gambling winnings by individuals.

Iredale said O’Connor played video poker compulsively, hours at a time. In court papers, he said that after the death of Peterson in 1994, followed by deaths of close friends and family members, O’Connor was grief-stricken and sought an outlet in gambling.

By 2008, prosecutors said she was struggling to stay afloat financially, with large debts to casinos. She liquidated savings, sold numerous real estate parcels, and took out second and third mortgages on a home in La Jolla, all to feed the gambling.

It wasn’t enough, and that is when she turned to the R.P. Foundation, created by her husband in 1966. He died in 1994.

Court records show that in late 2008 O’Connor withdrew $1,039,000 from the foundation, and in 2009 took another $1,049,000, transferring the funds both times to her personal bank account.

According to the foundation’s federal tax filings, the nonprofit was overseen by a three-member board that included O’Connor and her sister Mavourneen O’Connor and John McCloskey.

Halpern declined to comment on the actions of the other two trustees but emphasized that O’Connor was the only one to wrongfully siphon off funds.

The foundation is based out of a condominium on Eads Avenue in La Jolla Village. The property is owned by the Hilda E. McCloskey 2011 Trust, according to county records.

Under federal law, nonprofit foundations must grant 5 percent of their holdings each tax year.

The foundation for years made donations to groups dedicated to helping the sick and dying, including the Stepping Stone recovery center, Neighborhood House Association and the San Diego Hospice.

By the late 1990s, the foundation was reporting total assets exceeding $3 million. The holdings began to diminish in the 2000s, and declined to $2.1 million by 2008, tax records show.

The most recent tax filing, a public document that was submitted to the Internal Revenue Service in July 2011, lists no assets and an account receivable from trustee Maureen O’Connor in the amount of $2,101,900. Earlier returns show the foundation closing various trust and investment accounts, and even selling its artwork.